Boeing Limits Japanese Role on New Aircraft : Aerospace: The deal calls for three Japanese firms to build 20% of the 767-X. But they won’t be equity partners and will be excluded from overall design.
Boeing said Friday that three Japanese aerospace firms will build 20% of the structure for the firm’s next generation commercial jetliner, setting tighter limits on the Japanese role than had been expected.
Under a preliminary agreement, the three Japanese firms will not become “equity partners,” meaning that they will be excluded from participating in overall design and management of the new aircraft program, known as the 767-X, Boeing said.
But the Japanese firms--Mitsubishi Heavy Industries, Kawasaki Heavy Industries and Fuji Heavy Industries--will produce 15% to 20% of the aircraft’s structure and provide a roughly equal share of the capital for the program.
In addition, the Japanese aerospace firms will design the components under their responsibility and build tools for production. And although they will not have “equity status,” Boeing agreed to a complex formula in which their profits will be tied to the success of the program.
The overall agreement expands the Japanese role somewhat beyond the level of their participation in the Boeing 767 jetliner, in which they build 15% of the structure and do not have any profit sharing. And yet, it is far more limited than the 25% equity participation that Japan was to have on the smaller Boeing 7J7 jetliner program, which was scrapped by Boeing.
Boeing began offering the new aircraft to customers in December, but has not launched an estimated $3-billion development program.
As proposed, the aircraft would seat between 350 and 370 passengers in two classes and compete directly with the McDonnell Douglas MD-11. The new aircraft would feature a new wing, wider fuselage and more modern turbofan engines, compared to the 767.
The U.S. concern about Japanese participation in American aerospace programs stems from a formal Japanese government policy to become a leader in the industry. By granting Japan even limited access to U.S. programs, critics say, its major corporations will gain an advantage in an area now dominated by U.S. firms.
“I don’t think any one action, such as this agreement, is going to resolve the controversy,” said John Harbison, an expert in the Japanese aerospace industry at the consulting firm Booz Allen Hamilton. “Some people will view this as protecting the technology, but other people will say they are still involved in the program.”
Harbison noted that Japanese companies are moving aggressively to establish relationships with European, as well as U.S., aerospace firms. Mitsubishi’s aerospace business is growing at 40% annually and the company is considering changing its name to Mitsubishi Aircraft Industries.
But aerospace analyst John Simon said the Boeing accord on the 767-X should squelch U.S. concerns about Japan.
“It looks like Boeing got its way,” Simon said. “I am surprised they were able to negotiate that. Japan did not make any bones about the fact that they were looking for an equity position.”
Simon said the entire issue of attempting to throttle Japan’s entry into aerospace by excluding them from U.S. programs is a “bogus issue.”
“To say the Japanese are not capable ultimately to come up with the technology for their own airplane is like saying the Europeans were not capable of coming together to build a viable airplane. And we know today that is not true,” he said.
Boeing spokesman Dick Schleh said the raging public controversy had no direct bearing on the Boeing agreement, though he acknowledged that “those kinds of things were kept in mind while we approached the discussions. But I wouldn’t point to some pressure.” The more important factor, he added, was that “these three Japanese companies happen to be very high quality, cost effective and reliable suppliers.”
Schleh said the Japanese firms will produce the same items for the new jetliner as they produce for the 767, which include fuselage panels, farings, wing ribs and main landing gear doors. Those items constitute 15% of the structure. Up to an additional 5% of structure for the Japanese firms is yet to be determined.
Since an aircraft’s structure does not include engines, avionics, landing gear and interiors, Japan’s overall share of the aircraft program will be much less than 15% to 18%. It could be half of that amount, Boeing officials suggested.
Whatever share Japan has, some analysts will remain uneasy with the agreement.
